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Acquisition of Guatemalan Oil and Gas Assets

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Updated 19/05/13 9:31am GMT+8 Provided by ShareLink (http://www.sharelink.com.au)

In July 2012, the Company entered into an agreement to acquire an interest in two oil and gas development and exploration blocks in Guatemala (Projects) through the acquisition of Citation Resources Pty Ltd, which holds a 70% interest in Latin American Resources Ltd. The Projects consist of Block 1-2005 and Block 6-93 in the South Peten Basin in Guatemala (Guatemalan Blocks). The Projects have an established reserve base with significant exploration upside potential. In addition the blocks have had significant previous exploration and an appraisal drilling program is currently underway. The Projects and operational infrastructure are owned by Latin American Resources Ltd (LAR) together with its minority joint venture partners. Established Reserve Base with Significant Exploration Upside Potential
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LAR has 2 Guatemalan Blocks (1-2005 and 6-93) with combined 400,000 exploration acres within the highly prospective South Peten Basin of Guatemala. LAR is the operating holding company with a 80-100% interest in both blocks with the ultimate working interest determined by whether previous project operators take up their follow through rights as wells are drilled. Plan

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15/05/2013 Atzam 4 - Project Update (http://www.citation.net.au/media/articles/ASXAnnouncements/20130515Atzam-4---Project-Update-206/1221729.pdf) 01/05/2013 March 2013 Quarterly Appendix 5B (http://www.citation.net.au/media/articles/ASXAnnouncements/20130501March-2013-QuarterlyAppendix-5B-204/1217840.pdf) 30/04/2013 Previous operators prioritised their focus on other oil and gas opportunities in Latin America, leaving LAR to March 2013 Quarterly Activity acquire the blocks and execute the previously developed production and exploration programs. In 2012 the Report planned exit production is approximately 1,000 bbl/d from these 2 new appraisal wells, based on the previous (http://www.citation.net.au/media/articles/ASXAnnouncements/20130501flow rates of wells drilled on the same structure. March-2013-Quarterly-ActivityReport--202/1217705.pdf)

The Projects have had significant previous exploration and development with 2D seismic and prior wells.

The first appraisal well, Atzam #4, spudded in late June and is currently drilling ahead to its target depth of 4500ft. The intention is for the second well, Atzam #5, to spud following completion of a successful flow testing program on the Atzam #4 well.

The Atzam #4 well is being drilled on the same structure that the Atzam #2 well tested at an initial flow rate of up to 1,200 BOPD of 34API oil at a depth of 3,850 ft. The Guatemalan Blocks on which Atzam #4 is located have TSX certified 51-101 certified reserves identifying proved plus probable (P1 and P2) reserve estimates of 2.3 MMBBL. Underpinning development in Guatemala are excellent fiscal terms with net backs per barrel of approximately US$45 (assuming US$80 oil price) after all costs (including taxes and royalties). Existing Infrastructure and Capital Equipment in Place

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To date approximately US$18m of capital has been invested into exploration and development of the Projects and acquisition of operational infrastructure by the previous operator and LAR. In addition, LAR (the vehicle which the Company has the option to acquire a 70% interest in) owns the following infrastructure which will be used as part of its planned development program for the Guatemalan Blocks: Tubulars and other equipment in place to drill and complete 3 development wells Treatment and storage facility built with 3,000 barrel capacity Fully functional airstrip at Tortugas camp Full working camp with 50 person capacity Fully reconditioned 500 hp Harold Lee trailer mounted drilling rig Refurbished Wilson 38 Service Rig

Block 1-2005: Atzam The producing formation is the C-17. The Atzam #2 well previously drilled had initial flow rates of 1,200 BOPD of 36API oil at 4,000ft, before experiencing well integrity issues which led to new well designs for the proposed Atzam #4 well (successfully drilling at a current depth of 1,200ft) and the Atzam #5 well. Recent mapping of the Atzam structure using existing data from previous operators (Basic, Hispanoil) and MEM, and incorporating reservoir data acquired since production initiated in December 2007, indicate the possibility of a structure of comparable size and orientation to that of the existing Rubelsanto field in Guatemala. To date, the Rubelsanto field has produced +30 MMBBL of oil since its discovery in 1976. The field currently continues to produce 1,000 BOPD, 34 years after its discovery. Block 1-2005: Tortugas In addition to the Atzam structures on Block 1-2005, the Tortugas structure is a suspended oil field. Originally 17 wells on Tortugas salt dome were drilled by Monsanto looking for sulphur. One well (T9B) had an oil blowout at approx 2,200 ft and most others had oil shows in multiples zones. Two oil wells flowed oil at initial rates over 1,500 BOPD, both wells suspended in the mid 80's. LAR plans include the re-entry and re-completion of the work-over on two Tortugas wells, 63-4 and 63-5, and facility upgrades. Block 63-9: Las Casas LAR planned to re-enter and work-over of the Las Casas 3X. The lower zone previously tested 150 BOPD 40 API oil and approx 100 BBL of water per day. Target perforation and testing of the higher zone with plan to comingle with lower zone and put on production in 1H 2013. The structure is on trend and adjacent to Pacific Rubiales block. Guatemala Overview Guatemala is a politically stable country with a developing economy. Guatemala has enjoyed political stability since 1983 when the first free election for National Assembly (Congress) took place and a new constitution, currently in force was approved. In 1985 the first civil president was elected. Since that date, there have been six civilian presidents elected in free and democratic elections. Guatemala has enjoyed more than 30 years of stability, in the social, economic, and political sectors Guatemala has a favourable business climate for oil companies. There is a base royalty of 20% on 30API oil; royalty increases/decreases by 1% for each increase/decrease in API degree. In addition the corporate tax rate is 31% and there is cost recovery of 100% of capital expenditures. Current production in Guatemala is approximately 14,000 bopd with similar hydrocarbon geology to Mexico. The trends of major Mexican discoveries (such as the Nazareth Field) have been found to extend into Guatemala. The major producing basins, North Peten and South Peten, account for 90% of domestic production. The first oil discovered in Guatemala was in 1971 at Tortugas in LARs Block 1-2005.

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